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IU economists predict more of the same in 2013

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The economy in 2013 is likely to mirror the slow-growing one of this year, economists from Indiana University’s Kelley School of Business predicted Thursday morning at their annual forecast.

The panel predicted the national economy will expand about 2.5 percent next year, which is better than the 1.7-percent growth so far this year, due in part to increased consumer spending and improvements in the housing market. But the panel also said a number of factors could make things worse.

Even the best scenario won’t be enough to make much of a dent in the unemployment rate, which stood at 7.8 percent in November. The economists think the jobless rate will remain above 7 percent next year with inflation remaining close to 2 percent.

“We expect that 2013 will be generally similar to 2012: unacceptable slow growth, without much progress in the labor market,” Bill Witte, associate professor emeritus of economics at IU, said in a prepared statement.

Indiana, however, is faring better in terms of employment, said Jerry Conover, director of the Indiana Business Research Center. So far this year, payroll employment is averaging more than 52,000 above last year’s levels, he said.

“This is a more appealing picture than we painted last year for Indiana,” Conover said in a prepared statement.

At the current growth rate, however, Indiana still is about two years away from its pre-recession employment level, he said.

Real personal incomes in Indiana will rise less than 2 percent in 2013, with per-capita incomes rising about $1,500. The state's overall economic output will grow about 2.3 percent, comparable to the national rate, the economists forecast.

And like a year ago, a considerable list of issues could upset the economists’ expectations, especially what they refer to as the “fiscal cliff,” a potential economic growth-killing combination of higher taxes and government spending cuts. Such a situation would likely send the economy back into recession, they said.

Without congressional action, a long list of tax increases and spending reductions will go into effect Jan. 2, Witte said.

“In fact, the uncertainty about the situation is already having an impact on business decisions,” he said, pointing to a decline in plant and equipment investments in the third quarter. “The tepid pace of hiring probably also reflects this ambiguity.”

Other highlights from the forecast include:

— Prices of existing homes will rise and new housing construction will increase;

— Mortgage rates will continue at historic lows, as lenders finally begin to loosen reins on credit;

— Energy prices will remain relatively flat in 2013, with oil prices averaging at or below $90 per barrel;

— Stock market values should climb slowly next year, but well below long-term growth rates.



 

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  • Historical Comparison
    I take the position that we experienced a Depression starting in 2007, which reached epic status in September 2008 and continued through 2009. In reviewing the recovery efforts following the Great Depression of the 30's, I believe economists will find the need for Federal Government involvement in any large scale banking recovery. Historically, most companies sent people home during the Great Depression. Banks that failed due to poor internal management, were not bailed out by the Federal Government back then. Comparing year-over-year recovery efforts by looking at the previous year is nothing more than historical reporting with guesswork applied going forward. The view that the glass is half-empty, while projecting the continued increases on Wall Street, suggests that the Federal Bailout of the Banking System did alter the impact of the Depression of 2008, at least on Wall Street. The housing market will not fully recover until banks recognize that home loans are needed to spur the growth of the Housing Market which contributed to the year-over-year growth of the American Economy between 2002 and 2007. The fact that banks lost focus when it came to validating the capabilities of borrowers to pay their mortgage bill indicates poor management, not the ultimate failures when a predicted recession contributed to the bubble burst associated with the home loan market. Without the Bailout for Wall Street, Goldman Sachs would not exist today. Having an ex-Goldman Sachs CEO, Hank Paulson, serving as Secretary of the Treasury contributed immensely to the year-over-year growth on Wall Street between 2009 and Q-3 2012, while Main Street America continued to suffer. I am guessing that success factors that trace their roots to having friends in high places following a financial crash goes well beyond economic predictions, since it does not appear the Bailout of Wall Street was factored into most current economic reports.

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  1. I took Bruce's comments to highlight a glaring issue when it comes to a state's image, and therefore its overall branding. An example is Michigan vs. Indiana. Michigan has done an excellent job of following through on its branding strategy around "Pure Michigan", even down to the detail of the rest stops. Since a state's branding is often targeted to visitors, it makes sense that rest stops, being that point of first impression, should be significant. It is clear that Indiana doesn't care as much about the impression it gives visitors even though our branding as the Crossroads of America does place importance on travel. Bruce's point is quite logical and accurate.

  2. I appreciated the article. I guess I have become so accustomed to making my "pit stops" at places where I can ALSO get gasoline and something hot to eat, that I hardly even notice public rest stops anymore. That said, I do concur with the rationale that our rest stops (if we are to have them at all) can and should be both fiscally-responsible AND designed to make a positive impression about our state.

  3. I don't know about the rest of you but I only stop at these places for one reason, and it's not to picnic. I move trucks for dealers and have been to rest areas in most all 48 lower states. Some of ours need upgrading no doubt. Many states rest areas are much worse than ours. In the rest area on I-70 just past Richmond truckers have to hike about a quarter of a mile. When I stop I;m generally in a bit of a hurry. Convenience,not beauty, is a primary concern.

  4. Community Hospital is the only system to not have layoffs? That is not true. Because I was one of the people who was laid off from East. And all of the LPN's have been laid off. Just because their layoffs were not announced or done all together does not mean people did not lose their jobs. They cherry-picked people from departments one by one. But you add them all up and it's several hundred. And East has had a dramatic drop I in patient beds from 800 to around 125. I know because I worked there for 30 years.

  5. I have obtained my 6 gallon badge for my donation of A Positive blood. I'm sorry to hear that my donation was nothing but a profit center for the Indiana Blood Center.

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